SOUTH KOREA: HSBC On Impeachment Implications
The global bank outlines implications of the weekend impeachment vote. Noting the longer political uncertainty drags the worst it is likely to be for domestic sentiment (albeit with broader caveats in play). See below for more details.
HSBC: "The National Assembly passed the impeachment bill against President Yoon; the final vote count was 204 to 85. The Constitutional Court's adjudication will come out before 7 June; if the impeachment is sustained, a presidential election will follow before 6 August.
Uncertainty is here for longer: In former President Park Geun Hye's case over 2016-2017, the Court's adjudication to sustain impeachment came on 10 March 2017 (91 days from the passing of the impeachment bill on 9 December 2016). In former President Roh Moo Hyun's case in 2004, it took 63 days for the Court's adjudication to overrule impeachment.
Adding to the uncertainty around the timing and actual result of the adjudication is the current composition of the Court. The related act stipulates that the full bench (comprising seven or more justices) adjudicate a case and requires six or more justices' decision to sustain impeachment[1]. . However, the current Court only has six members - with three new members recommended by the National Assembly pending congressional hearing and appointment (by the President). Furthermore, two of the six members' 6-year terms come to an end on 18 April, 2025. This suggests that noises around the adjudication process will likely continue until the eventual decision.
All in all, 7 June, 2025, is the last day before which President Yoon's fate will be decided. 6 August, 2025 is the last day before which Korea will have a new presidential election, in case the impeachment is sustained by the Court. In the former President Park's case, a presidential election took place on 9 May (151 days from the impeachment vote[2]).
While there could have been other contributing factors, we see that sentiment tended to weaken through the period of political uncertainty, before bouncing back - faster in the 2016 case, potentially due to the reset in executive branch. We also saw KRW and KOSPI strengthen after the Court's adjudications, though these were likely also affected by healthy export momentum then. In turn, there was little discernible impact on hard data.
This suggests that a removal of political uncertainty in an orderly manner is likely a positive development for Korea's economy. As it is, the BoK's News Sentiment Index (which tends to lead consumer sentiment by a month) has shown a continued decline since the current political uncertainty started. In this regard, we think the National Assembly decision on Saturday is a step forward because it likely helps reduce uncertainty, in addition to the passage of the general budget for 2025 on 10 December."
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US OUTLOOK/OPINION: US Macro Weekly: Fed Shifts Hawkish As Disinflation Stalls
Our weekly US Macro publication is out (PDF):
- US “Inflation Week” brought largely in-line results, with sequential core CPI coming in a little lower than expected, and headline CPI and core PPI a little higher than expected.
- But overall the takeaway was that there was relatively little if any disinflationary progress in October, exacerbated by what looks like a small sequential acceleration in the core PCE reading for the month.
- The cumulative effect of surprisingly hawkish Fed commentary combined with the slight upside in core PCE (with a helping hand from solid initial jobless claims among other data demonstrating continued resilience) saw a notable shift in rate cut pricing this week.
- The December FOMC meeting appears to be "live", nearing 50/50 implied probability of a hold at one point Friday morning, versus closer to 20% at the start of the week.
- At the end of this document we highlight two major shifts in FOMC tone this week: one is that a "pause" was introduced as a possibility by a senior FOMC member (Gov Kugler); the other is that there is growing concern over the implications of soaring longer-end rates.
- Neutral rate-talk also dominated, and in a hawkish direction - Dallas Fed's Logan mused that the Fed had already perhaps already reached neutral rates.
- It's probably still the case that the FOMC is still in the "thinking about thinking about slowing rate cuts" stage, which means a December cut is the default. But some of the groundwork for a less dovish rate cut path appears to have been laid since the US election (the potentially hawkish implications of which, FOMC members didn't venture into).
- This week’s heavy data slate gives way to a quieter schedule Nov 18-22, with key macro highlights including flash November PMIs and housing market data, with FOMC speakers also of interest after this week’s shift (including Cleveland Fed Pres Hammack).
US OUTLOOK/OPINION: Atlanta Fed GDPNow Steady, PCE Upgraded Despite Control Miss
The Atlanta Fed's GDPNow estimate for Q4 remained steady at 2.5% Q/Q annualized in the Nov 15 update, reflecting higher personal consumption expenditures (now 2.8% vs 2.7% in the prior day's update), offset by downgrades to equipment/ nonresidential structure investment.
- The stronger PCE figure comes despite a softer-than-expected Retail Sales Control Group figure - we think this is a reflection of the higher revision to September's Control Group, which will statistically carry over into the Q4 growth rate.
USDCAD TECHS: Bull Cycle Extension
- RES 4: 1.4210 2.0% 10-dma envelope
- RES 3: 1.4140 1.500 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4122 3.0% Upper Bollinger Band
- RES 1: 1.4106 High Nov 15
- PRICE: 1.4077 @ 16:54 GMT Nov 15
- SUP 1: 1.3959 High Nov 1 / 6
- SUP 2: 1.3891/22 20-day EMA and a key S/T support / Low Nov 6
- SUP 3: 1.3785 50-day EMA
- SUP 4: 1.3611 Low Oct 8
A strong rally in USDCAD this week reinforces the current bullish condition. The pair has topped 1.3959, the Nov 1 / 6 high. This break confirms a resumption of the uptrend and has also resulted in a breach of 1.3977, the Oct 13 2022 high. 1.4140 marks the next upside level. Initial firm support to watch lies at 1.3891, the 20-day EMA. A short-term pullback would be considered corrective.
